If you file for bankruptcy, it affects only your obligation to repay a debt. If you discharge a debt in bankruptcy, the friend or relative who co-signed the debt consolidation loan will still be liable for repaying that debt. You will not be legally obligated to reimburse your friends or relatives if they wind-up paying your debt. Whether you do so is a matter between you and your conscience.
Should my spouse and I both file for bankruptcy?
Probably. If only one spouse files, you run a risk that the other spouse’s creditors may get a judgment and execute on property you acquire with your earnings during marriage after the bankruptcy.
May my employer fire me because I file for bankruptcy?
No. Both public and private employers are expressly prohibited from discriminating against an employee because he or she has obtained bankruptcy relief.
A word of caution: some kinds of jobs may be jeopardized by a bankruptcy filing. If you need to be bonded for your job, a bankruptcy filing may make it difficult or even impossible for your employer to acquire the bond.
If you have any worries about the effect of bankruptcy on your job, be sure to consult your employer before you file.
What will happen to my credit rating if I file for bankruptcy?
If you file for bankruptcy, it will remain on your credit report for ten years. That does not mean that you have to do without credit for a decade. You should be entitled to some credit again once you demonstrate that you are handling you finances in a responsible manner.
One way to do this is to apply for a “secured bank credit card” from your bank. You will have a low credit limit – equal to the amount you are required to keep on deposit with the bank. By handling that credit card wisely, you will demonstrate to other creditors that you are worthy of the extension of credit.
Establishing a good credit rating won’t happen overnight, but that’s not the end of the world. Remember what got you into trouble in the first place – credit. Maybe you’re better off without it for a while.
Oddly enough, in a few areas of the country creditors actually use bankruptcy filing lists as mailing lists for credit solicitations. Their thought is that the debtor is credit worthy because he cannot file for bankruptcy for the next six years and also has eliminated many other debts by the current bankruptcy filing.